11/19/1996 Meeting Minutes - Laserfiche WebLink

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Council Minutes of 11/19/96 NatCity had to contact Moody's to find out about the rating. The Mayor has a lot of problems with the rating structure and with this rating in particular. However, the good news is that the rating is not costing the city anything because the bonds were sold at a good interest rate and the insurance premium was reasonable. The $43 million bond issue was structured well. The investors believe the city is doing well and so do the residents who flooded in 1989 and 1995 but did not flood in 1996. Mr. Limpert commented that he was thrilled that the notes are now bonds and that they were sold at a better rate than what had been anticipated. He asked whether the city would have gotten an even better rate had Moody's rating been better. Mayor Boyle said no because, once the insurance companies stepped in at a .162% rate, we then carried a AAA rating. Mr. Limpert inquired whether the rating would hurt the city for the next bond issue sometime in the future. Mayor Boyle said it would not because Moody's has said that they will look at our financial picture on an annual basis, which they have actually always done. No matter what the city does, short-term or long-term borrowing, we send them our financials. Also, they receive our audits. We will probably enter the bond market in 1998 or 1999 at the earliest. He doubts whether we will even enter the note market in 1997. Moody's has criticized the city for low fund balances; however, our balances are improving because we've reduced the cost of operations. If they live up to their word, they should move us back into an A1. However, he is aware of several cities that have done exactly what Moody's has asked--Warren, Ohio, for example--and their bond ratings have not improved. He does not believe the rating will hurt our future long- term paper. It should be remembered that short-term paper is a different rating--that rating is a Migl. While in New York, the city did make a presentation to Standard & Poor's to allow that institution to begin compiling a "history" on the city should we ask them for a bond rating in the future. Other communities are also taking steps to move Moody's out. His comments tonight will put Moody's on notice that they are not "the only game in town." Mr. Musial asked what steps the city will take to regain the Al rating. Mayor Boyle said that we have already taken the steps. The crises we faced in the early 1990's included the safety forces, flooding and deteriorated streets. By investing approximately $69 million into capital improvements, flooding, streets and new equipment, the city has shifted into a maintenance mode. We will now be able to regulate our budget because we will have a better idea of what costs will be. We will be able to budget properly and build balances based on our taxes. This was all part of the plan. Compared to the 1980's, the city is more financially stable with smaller balances and less capital needs. He would not want to keep money in the bank if it means keeping sewage in the basement. On another matter, Mr. Musial asked the Mayor the status of senior housing. Mayor Boyle replied that construction has been delayed due to the developer's health problems. However, the city has concluded negotiations with the architect regarding retention. With the winter weather approaching, the project will probably not start until next year but they will try to make up for lost time. 3